Question

Which of the following statements is true about inventory management?​

	A.	The economic order quantity is the quantity at which the total inventory cost will be maximized.
	B.	A quantity discount is the level of inventory at which an order should be placed.
	C.	Safety stock is the additional inventory carried to guard against unexpected changes in sales.
	D.	​The reorder point is the discount from the purchase price that is offered when inventory is ordered in large quantities
	E.	​Outsourcing is the practice of ordering inventory from the supplier just when they are needed for production.

QUESTION 11

1. Which of the following actions is taken to reduce the collections period for receivables of a firm?​

   	A.	​Increasing the sales of the firm
   	B.	Decreasing the purchases of the firm
   	C.	Modifying the credit policy of the firm
   	D.	​Changing the inventory valuation method of the firm
   	E.	​Revising the working capital policy of the firm

Answer 1

The answer is C.

Safety stock inventory a.k.a buffer stock, is a term used in inventory management to describe the level of extra stock or additional inventory that might be needed in times of uncertainties either in demand or in supply.

It protects the firm from unforeseen variation is supply or demand or both.

Helps keep customer satisfaction.

Question 11

The answer is C.

Modify the credit policy of the firm -

Collection period is the time taken by the firm to collect a customer's account.

Business's average collection period is reliant on the terms of the credit policy.

Credit Policy plays an important role in the amount of time taken by the firm to collect a customer's account.

So by modifying the terms of credit policy firm can reduce the collection period for receivables.